We need an industrial strategy to diversify our economy and meet new demand

This article was first published on the London Evening Standard on 20 August 2012.

Our principal trade minister, Business Secretary Vince Cable, sees himself as the solution to our economic problems, telling us he would make a “good Chancellor”. Yet he is fully signed up to the same failed plans of the present incumbent — George Osborne — and he is failing to make the grade in his current role.

When both took office in 2010, unemployment was falling and growth was strong. Cable and Osborne vowed to secure the recovery and help British businesses start up and grow. However, since the election, unemployment has soared beyond 2.5 million. Britain is now the only G20 country, save for Italy, in a double-dip recession. Successful businesses are struggling to get the support they need.

Last Friday this newspaper revealed that five backbench Tory MPs are to publish a book in which they will say that part of the problem is British workers, whom they describe as “among the worst idlers in the world”. This follows the Foreign Secretary’s earlier claims that British businesses need to “work harder”.

But these out-of-touch ministers and MPs have only themselves to blame. It was their October 2010 spending review that choked off the recovery, precipitating a fall in confidence that caused sales to dry up. This was long before the eurozone crisis became the issue it is now. It was before many of their cuts to public investment started to feed through. Consequently government borrowing has come in at £150 billion more than they planned — equivalent to the defence, transport and education budgets put together.

Labour has urged Cable and Osborne to change course and implement an immediate plan to get our economy moving again in the short term. Leading economists who once backed the duo are now urging them to do the same. Our five-point plan includes a national insurance break for micro businesses in London — something the Government refuses to implement — and a temporary cut in VAT. They should adopt it now.

In the long term we also need to adopt the active industrial strategies which, for ideological reasons, the Tory-led Government stands in the way of. They are necessary to ensure we diversify our economy and to ensure UK plc is set up to meet the new demand coming from growing middle classes in emerging markets like those in Africa. Not only does this mean ensuring we get the policy right to provide the skills, finance and infrastructure investment that business needs. It means effective corporate governance and incentives that reward long-term value creation over the fast buck.

Above all, we should not be afraid of identifying and backing those British business sectors where we have a competitive edge and comparative advantage globally. That is, after all, the approach that helped win Team GB so many medals in so many sports.